The Great Lockdown and Herding Outlook during the COVID-19 Pandemic: A Changed World

COVID and Herd Behavior

Abstract

The Coronavirus pandemic (Covid-19) is not only a healthcare crisis but also a global disaster. This novel virus has forced the world to enforce "The Great Lockdown" to flatten the curve of the infections. In the name of social distancing, this lockdown has confined billions of people to their homes, causing various businesses to shut down and ceasing almost all economic activity. Pakistan is also expected to face a loss of up to 4% of GDP due to fluxes in various sectors such as hospitality and tourism, aviation, potential contraction of foreign direct investment and remittances and disruption in trade, caused by the lockdown imposed in the country. The current panic market conditions has induced investors to set aside their peculiar information and follow the decisions of other investors or market leaders, so lead to the occurance of herd behavior. Following this notion, the present study intends to investigate the herding prospects of investors during the COVID-19 Outbreak. Referring this, the KSE-100 Indexed companies of Pakistan Stock Exchange (PSX) have been taken in the loop to instigate such behavior. Results revealed that the KSE-100 Index exhibits herding behavior during the sample time period. Herding is profound, especially during the overall market and bearish market trend as compared to the bullish market.